U.S. farmers face shrinking markets, subsidy woes
WASHINGTON (Reuters) - American farmers will face shrinking export markets and sharply retreating prices this year while some of the richer ones will fight to hang on to long cherished subsidies.
After a record shattering year, U.S. farm exports could shrink by $20 billion in fiscal year 2009 to $95.5 billion as global economic growth posts its worst performance in the post World War Two era.
"What a difference 12 months makes," said Joseph Glauber, chief economist for the U.S. Department of Agriculture, on Thursday.
"We have seen prices for most commodities fall 40-50 percent from their mid-year peeks," Glauber told the USDA annual agriculture outlook conference.
Last year, as growing ranks of the poor worried about soaring food prices, American farmers flourished with exports rising $33 billion to a record $115.5 billion.
But this year with margins and farm income under pressure, farmers are expected to slash planting of major crops by 5.2 million acres to some 247.6 million acres.
And the world is awash in wheat after last year's bumper crop, putting further pressure on prices, Glauber said.
While farmers face a leaner year, President Barack Obama proposed a $500,000 a year cap on farm subsidies and a phase-out of the direct payments to the largest U.S. farmers in his new budget released on Thursday.
Obama also asked for elimination of cotton storage payments, reduction in the federal subsidy for crop insurance and reform of a cost-sharing program that builds overseas markets for U.S. goods.
Obama's proposals reflect pledges made on the campaign trail to target farm programs toward small- and medium-size growers. At that time, he promoted a $250,000 payment cap to farmers; there is no effective limit on payments now.
"The president supports the implementation of a $500,000 commodity program limit, which will help ensure that payments are made only to those that most need them," said a White House budget document. The cap would save $126 million through fiscal 2019.
Agriculture Secretary Tom Vilsack told reporters at the outlook conference that the cuts to U.S. farm payments could affect 3 percent of U.S.farmers.
"These are farms for the most part that receive a distortional amount of direct payments, and I think over a period of time, the president believes ... that those need to be adjusted," said Vilsack.
The White House said direct payments to America's largest grain, cotton and soybean growers, those with more than $500,000 a year in sales, should be phased out over three years. There are roughly 126,000 farms in that category, or 5.7 percent of U.S. farms, averaging more than 2,300 acres.
"Large farmers are well positioned to replace those payments with alternate sources of income from emerging markets for environmental services such as carbon sequestration, renewable energy production, and providing clean air, clean water and wildlife habitat," said the administration.
Congress rejected a $250,000 "hard" cap on farm payments as part of the 2008 farm law but agreed to other, modest changes in farm subsidy rules. Lawmakers also squabbled over direct payments, which are guaranteed to farmers regardless of crop prices or farm profitability.
The White House said a phase-out of direct payments to large growers would save $9.8 billion over 10 years, a one-fifth cut in outlays that run $5.2 billion a year.
(Additional reporting by Christopher Doering, Roberta Rampton, K.T. Arasu and Chuck Abbott; editing by Jim Marshall)
- Tweet this
- Share this
- Digg this